Stunning Demise Bank Financed Napoleon But Couldn’t Withstand Over-Aggressive Trader

Court-appointed salvagers swarmed into Britain’s oldest investment bank Monday to evaluate the remaining assets of Barings PLC after a brash 28-yearold trader ruined it by gambling on Tokyo stock prices.

The failure of Barings jolted Asian financial markets, sent the British pound tumbling against other currencies, contributed to a stiff lateafternoon fall in U.S. stock prices and sent rumors flying that the bank’s losses could grow as the details of the fiasco emerge.

Still, most big stock exchanges weathered the fear.

“The repercussions have been really very modest,” Bank of England Governor Eddie George told a news conference after the London Stock Exchange closed with a loss of less than half a percentage point in its key barometer, the Financial TimesStock Exchange 100-share index.

Barings’ failure was blamed on Nick Leeson, a Briton who worked for Barings in Singapore and accumulated $7 billion worth of risky investments known as stock-index futures contracts, linked to the performance of Japan’s stock market.

Leeson bet that the Nikkei 225 stock index, the main market barometer in Japan, would rise. It fell.

Then, like a poker player deep in the hole, Leeson apparently began doubling up his bets in hopes of recouping.

The tactic cost Barings hundreds of millions of dollars, forced it under the control of outside accountants and illustrated the pitfalls of global investing.

Leeson has been missing since Thursday, when executives at Baring’s London headquarters learned of his irregular dealings on futures contracts and jetted to Singapore to determine what went awry.

“He is not the sort who would do anything silly, but I don’t know why they haven’t got in touch. I just wish they would call to tell me they are safe,” said Alex Sims, whose 23-yearold daughter, Lisa, married Leeson three years ago.

The chairman of Barings, Peter Baring, suggested in an interview published Tuesday in the Financial Times that Leeson may have used an accomplice and been trying to get rich by wrecking the bank.

London’s financial community was stunned at the demise of the 232-year-old bank that financed the Napoleonic wars and counts Queen Elizabeth II among its clients.

But George said there is little any bank can do to prevent such a catastrophe if a powerful, clever trader goes haywire.

“It was a failure to control a rogue trader,” George said. He rejected suggestions that the Barings collapse shows a need for increased regulation of risky investments in far-flung financial markets.

At the same time Leeson was making the unauthorized Nikkei bets on the Singapore International Monetary Exchange, he accumulated wagers in other markets that the price would fall on $20 billion worth of Japanese bonds, George said. Those bets never became such big money-losers, however.

Barings’ losses came to about 625 million pounds, or $1 billion, by the weekend, when the Bank of England failed to rally other banks to rescue Barings. George said Barings’ status made it worth saving but said a publicly financed bailout was unjustified.

Other big British banks expressed an interest but balked because there was no way to put firm limits on the losses incurred by Barings.

“It would have been like pouring money into a black hole,” George said.

Barings was widely believed to have lost even more money on Monday, when Tokyo stock prices fell another 3.8 percent. There were rumors on Wall Street that the losses could reach $10 billion.

Administrators took control of Barings early Monday after they were appointed during the night by a judge who came to the Barings headquarters as rescue attempts collapsed.

The administrators hope they can find someone to buy Barings in one piece, injecting fresh capital and maintaining all of its businesses and 4,000 employees. Another possibility would be to sell off pieces.

A number of big financial houses in Britain, continental Europe and the United States have expressed an interest in picking up some of the pieces, the administrators said.

They refused to name names, but Germany’s Dresdner Bank AG was viewed as a possible bidder for parts of Barings. One Dutch banking source said either ABN Amro or Dutch ING Bank could become part of a consortium to buy a piece of Barings.

Dillon Reed and Co. in New York expressed interest in buying out Barings’ 40 percent stake in the firm.